President Donald Trump met with nearly a dozen community bankers on Thursday, pledging to ease regulations the industry says has stifled its growth.
Community banks “play a vital role in helping create jobs by providing approximately half of all loans to small businesses . . . [We want to] preserve our community banks,” Trump said during meeting in the Roosevelt Room of the White House.
The meeting — dubbed a “listening session” — was also attended by Treasury Secretary Steve Mnuchin and Gary Cohn, head of the National Economics Council, as well as executives from small banks across the country, including Texas and Vermont.
“You’ll be able to loan. You’ll be able to be safe. You’ll be able to provide the jobs that we want and also create great businesses,” Mr. Trump told the bankers.
Trump’s statements echo his repeated pledges to dismantle financial crisis-era legislation, the Dodd-Frank Act. The law was designed primarily to rein in large Wall Street firms, but small and medium-size community banks say they have been crushed under its new regulatory burdens.
“One-size-fits-all regulations are imposing unnecessary burdens on community banks that stifle lending and growth in local communities,” said Rebeca Romero Rainey, chairman of the Independent Community Bankers of America.
Community banks, they say, shouldn’t face the same sort of rules as megabanks such as Goldman Sachs or Bank of America. The smaller banks, for example, want to raise the $50 billion asset threshold at which banks face tougher oversight. And they are fighting proposed rules that would require banks to comply with the same reporting requirements when making a small-business loan as they do with a mortgage. That extra paperwork, and the threat of facing prosecution or a fine if it is not filed correctly, industry officials say, could scare some banks away from making small-business loans.
“It is encouraging to have a president who is listening to the concerns of community bankers who have been buried under an avalanche of burdensome regulations as a result of Dodd-Frank,” Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, said in a statement.
“We are losing, on average, a community financial institution a day because of the sheer size, weight and complexity of these regulations that prevent community banks from serving their customers.”
Hensarling is preparing to unveil new legislation, as soon as this month, that would strip out significant parts of Dodd Frank. Trump has ordered Treasury Secretary Steve Mnuchin to issue a report by June recommending ways to ease banking industry rules. It is part of a larger Trump administration effort to roll back regulatory burdens across numbers industries, including the energy sector.
But Trump’s bid to ease the burden on Wall Street is likely to face stiff resistance from Democrats and advocacy groups who say banks need more restrictions, not less, to ensure there is not a repeat of the financial crisis that required big taxpayer bailouts nearly a decade ago. And despite the industry complaints, banking profits have reached record levels, they say.
Last year, the country’s nearly 6,000 banks — from large players, like Bank of America, to small community banks — pulled in more than $171 billion in profits, up nearly 5 percent compared with 2015, according to government data. Community bank profits has been rising even faster — 10 percent last year. The proportion of community banks that made a profit reached 95.7 percent compared with 78.8 percent in 2010 when the Dodd-Frank Act was passed.
This type of data shows, advocates of financial regulation say, that regulations are not holding back the industry.